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NEWS & CURRENT AFFAIRS

The Nairobian

Beer and airtime boost KRA’s excise basket

News

By Frankline Sunday | May 10, 2016

The taxman collected Sh14 billion in excise tax on airtime, which provided one of the largest income streams last year.

In a year marked by depressed revenue collections across many Kenya Revenue Authority (KRA) tax divisions, mobile phone users proved a welcome source of funds.

Data from the Kenya National Bureau of Statistics (KNBS) indicates that revenue from excise duty on selected items, including beer, wines and spirits, cigarettes, airtime and financial transactions, nearly doubled from Sh36 billion in 2014 to Sh62 billion last year.

The bulk of the revenue growth came from new tax levies netted from airtime purchases.

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Prior to the 2014-15 annual Budget cycle, a task force led by former Education assistant minister Kilemi Mwiria recommended additional taxes be levied on fast-moving consumer goods to raise money to fund free secondary education.

According to the Communications Authority of Kenya (CA), the country has more than 37 million mobile phone subscribers, each of whom speak on their devices for an average of 89 minutes a month.

CA added that mobile services earned operators in the country Sh172 billion in 2014 up from Sh140 billion in 2013.

In data released last week, KNBS added that beer retained its position as the top revenue earner, with Sh19.5 billion collected from its sale across the country last year.

Cigarettes, traditionally the second-largest source of excise for KRA, dropped to third position, bringing in Sh12 billion.

KRA further brought in Sh7.2 billion on the 10 per cent excise tax levied on financial transactions, which was criticised as punitive and detrimental to financial deepening by the sector’s lobby groups.

A further Sh6 billion was collected from sales of wines and spirits, which was a 32 per cent increase from Sh4.6 billion in 2014.

KRA made Sh2.5 billion from taxes on the sale of mineral water, soft drinks and juices,while excise from sales of jewellery, cosmetics and locally assembled vehicles brought in Sh902 million.

The statistics agency added that overall revenue from excise taxes is expected to grow 24.7 per cent from Sh115 billion in the 2014-15 financial year to stand at Sh144.5 billion by the end of the 2015-16 year.

“This growth will be supported by the enactment of the Excise Tax Act 2015, which has led to the expansion of the tax bracket to include products that were previously not covered, such as airtime and financial transactions,” said KNBS.

Last year, the Government was criticised for raising the excise on cigarettes, beers and spirits, which led to price increases. According to research released recently by consulting firm Viva Africa Consulting, the excise taxes levied on alcoholic spirits have fuelled the growth of the illicit liquor industry.

In addition, the study warned that the taxman loses 30 per cent of excise tax collected in foregone revenue through the smuggling of ethanol used for the manufacture of illicit brews.